|Extent of IFRS application
|IFRS Accounting Standards are required for domestic public companies
|IFRS Standards as adopted in Korea (which are IFRS Standards as issued by the IASB Board without modifications) are required for listed companies and financial institutions.
|IFRS Accounting Standards are permitted but not required for domestic public companies
|IFRS Accounting Standards are required or permitted for listings by foreign companies
|Foreign listed companies are permitted to use (a) IFRS Standards, (b) IFRS Standards as adopted in Korea, or (c) US GAAP.
|The IFRS for SMEs Accounting Standard is required or permitted
|No. However, SMEs are permitted to use full IFRS Standards.
|The IFRS for SMEs Accounting Standard is under consideration
Profile last updated: 23 June 2017
The KASB plays the following two roles depending on the category of companies on which accounting standards are enforced:
Facilitating endorsement of IFRS Standards. The KASB facilitates the Korean government’s endorsement of every IFRS Standard issued by the IASB for the benefit of companies applying IFRS Standards. In broad terms, all listed companies and some unlisted companies are required to use IFRS, and all unlisted companies are permitted to apply IFRS Standards. Endorsed IFRS Standards are referred to as IFRS Standards as adopted in Korea, or K-IFRS for short. To date all IFRS Standards as issued by the IASB have been endorsed as K-IFRS without modification.
Setting the local accounting standards. The KASB sets the accounting standards for companies not applying IFRS Standards, typically unlisted companies, and also provides authoritative interpretation of the standards.
All listed companies on the Korea Exchange are required to apply IFRS Standards. This includes companies that intend to have their stock listed during the year or next year.
IFRS Standards are required for financial institutions whether or not their securities are publicly traded (including banks, insurance companies, financial holding companies, credit card companies, investment traders, investment brokers, collective investment business entities, and trust business entities) and state-owned companies. However, application of IFRS Standards to mutual savings banks has been deferred until annual periods beginning on or after 1 January 2016.
All other unlisted companies are permitted to apply IFRS Standards at their choice. If they do use IFRS Standards, there is no requirement to reconcile to Korean GAAP.
The IFRS Standards that Korea has adopted are referred to as IFRS Standards since there is no carve-out or modifications.
Unlisted companies may opt to apply IFRS Standards.
June 2016 evaluation of IFRS Standards in Korea
In June 2016, the Korea Accounting Standards Board published a report of its evaluation of the adoption of IFRS Standards after five years of use. Overall, the study found that IFRS Standards have had a positive impact on international financing for Korean firms.
The research also shows that although accounting-related costs have increased for local firms and companies, the local preparers and users of financial statements have identified positive effects from IFRS adoption, including:
The report of the evaluation is available on the publications section of the KASB's website.
All of the following are used in audit reports of large Korean companies:
The KASB translates every IFRS Standard issued by the IASB into the Korean language. The translation is drafted by the KASB staff and then exposed to the public with invitation to comment after approval by the KASB. The KASB carries out investigations into any issues that may concern the government, ie the Financial Services Commission (FSC), who is to make a final decision on the endorsement of the translation of the IFRS done by the KASB. Once the translation of the IFRS Standards is endorsed by the government, it is integrated into the domestic legal framework. The procedure may be summed up in the following sequential steps:
South Korea has added a presentation requirement to IAS 1 Presentation of Financial Statements to require disclosure of operating profit or loss on the face of the statement of profit or loss and other comprehensive income.
Korea has added to IAS 1 a requirement to present a Statement of Appropriations of Retained Earnings. This requirement was added to IAS 1 to be aligned with the Commercial Law.
South Korea has added a disclosure requirement to IAS 11 and IFRIC 15 (Blue Book), and IFRS 15 and IAS 37 (Red Book) which requires entities to provide additional disclosures relating to recognising revenue under the percentage of completion method when using the particular method set out in paragraph 30 (a) of IAS 11 Construction Contracts (the so-called 'cost-to-cost' method). The additional disclosure requirement is applicable to a listed entity when the entity’s contract revenue in the preceding year exceeds a certain level. Such entities are required to provide more detailed disclosures of each contract and additional disclosures about the operating segment.
Korea has renumbered the standards as follows:
The KASB sends translated IFRS Standards in MS Word format to the IFRS Foundation after they are published in Korea. This procedure is in accordance with the copyright waiver agreement between the KASB and the IFRS Foundation.
Appendix B of the copyright waiver agreement between the KASB and the IFRS Foundation sets out the translation process as follows: The purpose of the translation of IFRS Standards is not to interpret or explain the Standards, but merely to render the meaning of the English text in another language. Consequently, personnel for translation may not add, reduce or alter in any way the substance and content of the Standards and interpretations as approved by the International Accounting Standards Board, although grammatical and syntax adaptations to improve the readability of the text in the language in question are acceptable.
The translation process ensures an ongoing translation of the continuous updates to the standards.
The Coordination Committee provides the Translator with the list of terminology. The terminology list is to include at a minimum all terms in the IFRS Foundation’s terminology list, but may also include additional terms that are considered necessary. The Translator uses it for translation, makes a list of new terms that need to be included in the list of terminology, and sends it to the Coordination Committee.
The Coordination Committee reviews any new terminology, and provides the reviewed list to the translators to use as a basis for translation.
The Translator delivers translation as a form of comparative table of English and Korean language to the Peer Reviewer.
The Peer Reviewer examines the comparative table and sends any findings to the Translator.
The Translator discusses the findings with the Peer Reviewer and then the Translator implements the findings that they both agreed on and forwards the revised translation to the Review Committee. The translator also sends any findings where agreement could not be reached to the Coordination Committee for further discussion.
The Review Committee examines the accuracy and consistency of the translation and notifies the translator of any corrections.
The Translator considers the corrections made by the Review Committee and the Translator may discuss the corrections with the Review Committee if necessary. Any items where agreement could not be reached are forwarded to the Coordination Committee.
The Translator forwards the revised translation to the Proofreader.
The Proofreader reviews accuracy of grammar and expressions and sends any corrections to the Translator.
The Translator forwards the revised comparative translation table of English language and Korean language to the Coordination Committee after implementing the corrections from the Proofreader.
The Coordination Committee examines the accuracy and consistency of the translation through discussions with the Translator and the Peer Reviewer.
The Coordination Committee updates the list of terminology.